In working as a Practice Management Advisor for the New York State Bar Association over the past thirteen years, I had worked with dozens of senior attorneys and executive committee members in developing Exit Plans for key partners and shareholders. Although it sounds easy to do, goal setting for purposes of professional development – at any age – is difficult to accomplish, unless an individual’s career goals and performance goals can be tied into each practice group and law firm performance standards.
How do experienced attorneys know what types of goals they should set? Fortunately, progressive law firms are beginning to realize that professional advisors or mentors can be extremely helpful in working with senior partners in setting personal goals and creating realistic transition/retirement plans, that better serve both the retiring partners and the firm’s leadership objectives.
There is no set formula, for developing Advanced Exit Plans, but I have worked with numerous bar associations and law firms to help firms develop strategies for leadership transition. Please feel free to contact me at [email protected] if I can be of any assistance to you in this area.
I. Who Should Establish an Advanced Exit Plan?
1. You receive a call from a widow of a sole practitioner. She informs you that her husband has passed away several weeks prior. Her garage is filled with old client files. She does not know what to do with these files. Could you help her close her husband’s practice?
2. I received a call from a managing partner of a large law firm that had just rolled out a new partner retirement plan. The managing partner wanted help for individual partners in adjusting to these changes. The managing partner also wanted to provide affected partners with a forum to give feedback to firm leadership.
3. You receive a call from the wife of a former law school classmate and life-long confidant. She informs you that her husband – your friend – has had a severe stroke, and the wife was hoping you could help her maintain her husband’s practice – at least until they could determine how much permanent damage the stroke had caused. She may later need help in closing the practice.
4. I received a call from a senior attorney from a rather remote part of the state. For a number of years, she had been looking to hire another attorney so she could begin phasing away from fulltime practice of law. She wanted to start spending more time with her grandchildren. Two years ago she found a recent law school graduate with roots in the community, and things were working out well. Her question to me was how I might be able to help her in transitioning the firm to the young partner over a period of years.
5. You are looking into purchasing a practice from a sole practitioner, but the sole practitioner passes away before the sale could be finalized. You want to honor the commitment you made to the family.
6. As a Practice Management Advisor for the 70,000 member, New York State Bar Association, the attack on the World Trade Center on 9/11/01 gave me a much more personal understanding of the importance of Disaster
Planning. Many lawyers in offices surrounding the World Trade Center were unable to access their offices and client files for weeks after the tragedy. If you had five-minutes to grab whatever important papers you needed from your office, could you do it?
II. Advanced Exit Planning – How Should You Get Started?
1. Collect Information and Locate Relevant Resources – Many state bar associations have resource materials and CLE programs dealing with: “Lawyer Retirement”, “Closing a Law Office”, “Sale of a Law Practice” and other related topics. There are numerous areas within the Model Rules and related ethics opinions that need to be reviewed when developing an exit plan. Review state and local bar association web sites, and begin compiling your own tailored list of resource materials for yourself.
2. Identify Appropriate Practice Checklists. A number of bar associations and Law Societies are worth particular note:
•Oregon State Bar Association – Professional Liability Fund
•Law Society of British Columbia
•Law Society of Upper Canada – Lawyers’ Professional Indemnity Company
III. Advanced Exit Plan – Implementation, Implementation
After you have completed your research and have identified your goals, the challenge that remains is in implementation. Most plans fail to materials because supports have not been provided to help individuals and the firm implement the plan.
The following is a sample of an Implementation Strategy for a sole practitioner. It is not an appropriate strategy used with groups of retiring partners, but the time-lines and basic approach can be helpful.
Step 1: Designate a successor attorney to close your practice in the event of your disability, impairment, incapacity, or death.
•limited power of attorney,
•a comprehensive agreement with detailed powers, or
•a short authorization and consent
Identify several potential successor attorneys – Talk with appropriate family members and colleagues about why you feel it is important to establish an Advance Exit Plan. In the next 30-days interview at least three practitioners to see how they are handling their own exit plan. Select one of these candidates to see if they would be willing to partner with you in going through this planning process. As a general rule, good friends will recognize the value of this exercise for their own practice, and they will respond to your interest in them. Be prepared to get involved as a successor attorney for your friend.
Step 2: Prepare written instructions to your family, your designated successor attorney and your office staff containing:
•General information and guidance required to minimize uncertainty, confusion and possible oversight;
•Specific detailed information and authorizations needed to wind down your law practice;
•Steps to be taken to assure that your written instructions are updated and reviewed periodically for completeness and accuracy.
Set aside a specific period of time to complete the Advance Exit Plan – The development of an exit plan cannot be done in a single meeting. There are a number of elements that need to be researched and coordinated, so the Advance Exit Plan should be handled as any other client matter.
Open a file for your Advance Exit Plan, and commit the time each month to accomplish this important task – on budget and on time. In my experience, a three-month period of time is not unusual for a sole practitioner to establish an Advance Exit Plan. Working with an experienced coach in implementing this plan can be extremely helpful.
Step 3: Discuss your Advance Exit Plan with the appropriate persons. Set specific short-term goals for completing clearly defined tasks.
Allocate time each month to complete the planning process – Be prepared to spend approximately five-hours a month (non-billable) for a three-month period of time to complete the Advance Exit Plan. This time will be needed to meet with key family members and other resource people who will be involved in helping you develop this plan. Many practitioners already have a number of the elements (a will, life insurance, retirement investments) of an exit plan in place, however, time will be needed to update and coordinate these plans developed over many years of practice.
Be prepared to call on your office support staff (if you have any) to help in developing your exit plan. Compiling accurate lists of client information with current financial information will be extremely important. Closing old files and tightening-up and documenting office procedures are also important parts of this planning process.
Step 4. Your Advance Exit Plan should describe arrangements you enter into with your designated successor attorney, covering the following:
•A signed consent form authorizing your successor attorney to contact your clients for instructions on transferring their files;
•Authorization to obtain extensions of time in litigation matters, where needed;
•Authorization to provide all relevant people with notice of closure of your law practice.
Allocate resources (Time & Money) each month to complete the Advance Exit Plan – It is not unusual for individuals to need outside assistance in order to fully implement an Advance Exit Plan. A trusted advisor can help you with your commitment and accountability in preserving your strategic investment in self, family and loved ones.
Budgeting for an experienced executive coach can be based on the hourly rate of the individual attorney establishing the exit plan. The same monthly commitment of time will be needed from the coach or advisor, and a commitment of the same three-month period of time is needed. For a sole practitioner, it is not unusual to budget around $1500 a month for a three-month period of time.
Special arrangement will be made for multiple partners in a firm.
Contact: Stephen P. Gallagher at [email protected].
Step 5: Your Advance Exit Plan Might Include
Your Advance Exit Plan might also include sample letters notifying clients of your inability to continue in practice, and arranging for transfer or return of files. The plan should also include instructions as to:
•Disposition of your office furnishings and equipment;
•Authorization to draw checks on your office and trust accounts;
•Payment of current liability of the office;
•Billing for and collecting fees on open files;
•Collecting accounts receivable;
•Access to important information (e.g. passwords to your computer).
Your Advance Exit Plan might also include provisions that give your successor attorney or executor, as the case may be, authority to:
•Wind down your financial affairs;
•Provide your clients with a financial accounting and statement;
•Collect fees on your behalf;
•Liquidate or sell your practice.
Your Advance Exit Plan should include any arrangements for payment by you or your estate to your successor attorney for services rendered to your clients or on your behalf.
Trust Account Notice:
If you do not make arrangements to allow someone access to your office trust account(s), your clients’ money must remain in trust until a court permits access. This is likely to cause delay and put your client and you in a difficult position.
Disposition of Open Files
1Decide when you will cease to accept new files.
2Discuss potential conflicts.
3Contact current clients in writing.
4Review all your time records.
5Prepare detailed memo on the nature of each file. Important dates prominently noted.
6When you are the counsel of record, make arrangements to get off the record
Disposition of Closed Files
1Determine if files should be stored, destroyed, returned to the client or transferred to the lawyer who will assume ongoing files
2Return client property.
4Review Trust Accounts. Return trust funds to clients or transfer funds to the lawyer who will be assuming the client’s ongoing file.
5Pay any outstanding firm liability including payroll, trade debts, etc.
Determine whether it will be necessary to leave open a general account with a reserve to satisfy any outstanding obligations or for receipt of any accounts receivable